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  Investment incentive reduced by climate damages can be restored by optimal policy

Willner, S., Glanemann, N., Levermann, A. (2021): Investment incentive reduced by climate damages can be restored by optimal policy. - Nature Communications, 12, 3245.
https://doi.org/10.1038/s41467-021-23547-5

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Item Permalink: https://publications.pik-potsdam.de/pubman/item/item_25566 Version Permalink: https://publications.pik-potsdam.de/pubman/item/item_25566_3
Genre: Journal Article

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 Creators:
Willner, Sven1, Author              
Glanemann, Nicole1, Author              
Levermann, Anders1, Author              
Affiliations:
1Potsdam Institute for Climate Impact Research, ou_persistent13              

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 Abstract: Increasing greenhouse gas emissions are likely to impact not only natural systems but economies worldwide. If these impacts alter future economic development, the financial losses will be significantly higher than the mere direct damages. So far, potentially aggravating investment responses were considered negligible. Here we consistently incorporate an empirically derived temperature-growth relation into the simple integrated assessment model DICE. In this framework we show that, if in the next eight decades varying temperatures impact economic growth as has been observed in the past three decades, income is reduced by ~ 20% compared to an economy unaffected by climate change. Hereof ~ 40% are losses due to growth effects of which ~ 50% result from reduced incentive to invest. This additional income loss arises from a reduced incentive for future investment in anticipation of a reduced return and not from an explicit climate protection policy. Under economically optimal climate-change mitigation, however, optimal investment would only be reduced marginally as mitigation efforts keep returns high.

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 Dates: 2021-04-292021-05-312021-05-31
 Publication Status: Finally published
 Pages: -
 Publishing info: -
 Table of Contents: -
 Rev. Type: Peer
 Identifiers: PIKDOMAIN: RD4 - Complexity Science
Model / method: Acclimate
Organisational keyword: RD4 - Complexity Science
Working Group: Numerical analysis of global economic impacts
Research topic keyword: Climate Policy
Research topic keyword: Economics
Regional keyword: Global
Model / method: Decision Theory
MDB-ID: yes - 3219
OATYPE: Gold - DEAL Springer Nature
DOI: 10.1038/s41467-021-23547-5
 Degree: -

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Project name : Ökonomie des Klimawandels – Verbundprojekt: Klima-Wirkungsketten in einer globalisierten Welt: eine Herausforderung für Deutschland (CLIC)
Grant ID : 01LA1817C
Funding program : Ökonomie des Klimawandels
Funding organization : BMBF

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Title: Nature Communications
Source Genre: Journal, SCI, Scopus, p3, oa
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Pages: - Volume / Issue: 12 Sequence Number: 3245 Start / End Page: - Identifier: CoNE: https://publications.pik-potsdam.de/cone/journals/resource/journals354
Publisher: Springer Nature